For 2016-17, the EA is set at £3,000. This means that if you are eligible, you will not have to pay employers’ Class 1 contributions up to this amount. The following set out some of the less well known facts about this allowance:
- The EA can only be used against your employer Class 1 NICs liability. It cannot be used against Class 1A or Class 1B NICs liabilities. Class 1A and 1B NICs are those payable on any taxable benefits or expenses provided by a business to its employees.
- You cannot claim the EA if the only employee paid above the secondary threshold is a sole director; or someone paid for personal or domestic work (unless they are a care or support worker).
- You can only claim one EA for your business or charity even if you have multiple PAYE schemes for different parts of your business or charity.
- You should take off the EA from employer Class 1 NICs liabilities before deducting any other amounts, for example, recoverable Statutory Maternity Pay.
- If you do not use your full £3,000 EA entitlement against your nominated PAYE scheme, but you have employer Class 1 NICs liability on your other PAYE schemes, and have paid all your PAYE up to date, you can apply to HMRC (at the end of the tax year) for a refund of any unused balance.
- If you do not apply for a refund, and have an unused balance you should apply to HMRC to use this against any forthcoming PAYE debt.
- If you make your claim for the EA towards the end of the tax year, you might not incur sufficient employer Class 1 NICs liabilities in the remainder of the tax year to use up the allowance in full. If so, HMRC will use the balance remaining against any PAYE debt or other tax/NIC liabilities arising in the following tax year. If you do not have any existing PAYE debts or liabilities to set the unused balance against, you can claim your allowance as a repayment.
- You can make a claim for the EA up to 4 years after the end of the tax year in which the allowance applies. For example, if you want to make a claim for the allowance for the tax year 2015-16, you must make your claim by no later than the 5 April 2020.
If a business that is claiming the EA changes ownership, then that existing claim for the allowance will end when the transfer of ownership occurs.